(MONEY Magazine) – Bill Miller says most investors are far too timid. They over-diversify and sell at the first whiff of trouble. Not Miller. His Legg Mason Value fund holds 35 stocks (the average fund has 160), and he rarely sells. And how's this for bold: In August, he bought 4.2 million shares of Google (GOOG) in its much hyped—and, many said, overpriced—initial public offering.

So it's no surprise that Miller seems unfazed about the possibility of underperforming the market for the first calendar year since 1990. "We're positioned to play offense," says Miller. "I was willing to take the risk that short-term results would suffer if the market performed poorly this year." As of Nov. 19, he trailed the S&P 500 by 2.4 percentage points. That's still within striking distance, but Miller admits that he was out of step with investor sentiment for most of 2004. At the beginning of the year he considered "whacking back" some of his more volatile stocks, notably Amazon.com (AMZN), in anticipation of a ho-hum market. He decided against it. And he ignored booming energy stocks.

Miller says he's looking for an opportunity in energy now. Otherwise, he's sticking with his trademark mix of speculative growth and deep value plays. He's still in Google, even though it's doubled since the IPO. And earlier this year, he jumped into video-game maker Electronic Arts (ERTS). The company is 35% more expensive than the typical S&P stock, based on its price-to-earnings ratio, and its earnings growth recently slowed to 6% from 40% a year before. Miller points out that video games are the fastest-growing sector of the entertainment industry and Electronic Arts is the most profitable company of the group. He says game-enabled cell phones and new home systems will reenergize growth. Another addition: Countrywide Financial (CFC), trading at eight times earnings. The mortgage lender faces rising interest rates, but its high servicing fees are a cheap source of capital for loans.

Miller (and his investors) have every reason to stay confident. The fund has surpassed the S&P by an annualized 5.7 percentage points over a decade. So what's one off year? —STEPHEN GANDEL